Financial Risk Manager Part 1

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Explanation:

For a currency futures/forward quoted as USD per unit of foreign currency, IRP implies:

F_0 = S_0 e^{(r_{USD}-r_{foreign})T}

If futures prices increase with maturity, then the forward curve is upward sloping, which means:

r_{USD} - r_{foreign} > 0

So:

r_{USD} > r_{foreign}

Therefore, US risk-free interest rates are greater than foreign interest rates.

Explanation:

For a currency futures/forward quoted as USD per unit of foreign currency, IRP implies:

F_0 = S_0 e^{(r_{USD}-r_{foreign})T}

If futures prices increase with maturity, then the forward curve is upward sloping, which means:

r_{USD} - r_{foreign} > 0

So:

r_{USD} > r_{foreign}

Therefore, US risk-free interest rates are greater than foreign interest rates.

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Last updated: April 18, 2026 at 11:32

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